Governors take a walk on the supply side
If you want a window into what’s on the country’s mind, pay attention to what governors say during their annual state of the state speeches. Last year, the teen mental health crisis was a common theme. This year, more than 20 governors talked to their state legislatures about housing affordability and accessibility. Rent or mortgage payments are the biggest expense in many family budgets. And yet higher interest rates, engineered by the Federal Reserve for the urgent purpose of cooling inflation, have had the negative side effect of making it harder for young people to afford a home.
The conventional policy kit focuses on the demand side of the problem: rent controls, eviction moratoriums, direct payments, subsidies for home improvements and mortgage assistance. There can be a limited role for such policies. But as governor after governor acknowledged, there’s a growing recognition that solutions lie primarily on the supply side. Whether there’s an actual shortage of housing in the United States is a matter of debate and definition, but expert estimates suggest improving overall affordability would require increasing the existing stock of about 142 million homes by between 1.7 million and 7.3 million.
The result is a pendulum swing in favor of growth and development. “The rent is too damn high, and we don’t have enough damn housing,” said Michigan Gov. Gretchen Whitmer (D). “Our response will be simple: Build, baby, build!” She set a goal of 75,000 new or refurbished units in five years. She touted a new $1.4 billion state investment in construction. “The single largest threat to our future prosperity is the price of housing,” said Utah Gov. Spencer Cox (R), who called for $150 million worth of infrastructure and other spending to support construction of 35,000 starter homes by 2028.
What’s especially interesting about this year’s state of the state speeches, though, is how often governors called not only for more spending but also for fewer regulatory barriers to new private-sector construction: Nine of them did so in one form or another. Colorado Gov. Jared Polis (D) proposed allowing homeowners to rent out accessory dwelling units, better known as granny flats or casitas. He’s also pressing to ease occupancy limits and parking requirements for new construction. “Housing policy that creates more affordable choices for Coloradans is my Roman Empire,” he said. “If you don’t get that joke, feel free to ask someone from Gen Z.”
New York Gov. Kathy Hochul (D) wants to lift limits on residential density in New York City, specifically what’s called the floor area ratio. Like Mr. Polis, she also wants to let people turn existing basement and cellar apartments into units they can legally rent out. Connecticut Gov. Ned Lamont (D) advocated making it easier for developers to convert empty parking lots, half-empty office buildings and abandoned industrial sites into housing. He highlighted 250 new units in Meriden that replaced a bankrupt shopping center.
“We will cut government red tape that makes it harder to build quality housing,” Maryland Gov. Wes Moore (D) promised. “We must protect our farmland and wild habitats, but we need to make sure we are also incentivizing housing in places where we should build.”
Massachusetts Gov. Maura Healey (D) calls housing “the biggest challenge we face” and says the shortage has been “decades in the making.” She proposes an Affordable Homes Act to “reduce barriers to housing production and give communities the tools to develop more housing where they need it.” Vermont Gov. Phil Scott (R) asked his Democratic-supermajority legislature to revisit a 1970 law that makes construction expensive and slow by requiring a public, quasi-judicial process for reviewing and managing the environmental, social and fiscal consequences of development. “It was enacted at a time when we were growing way too fast,” he said. “Today we face a different reality — one where families desperately need homes.”
New Mexico Gov. Michelle Lujan Grisham (D) announced a new Office of Housing as a onestop shop for contractors seeking permits and asked the legislature to condition state aid to local governments on their adoption of development-friendly zoning and permitting requirements. For their part, red states also continue trying to speed up reviews, inspections and permits. “Legislation about permitting may not sound like front-page news,” said Tennessee Gov. Bill Lee (R). “But just take it from someone who spent 35 years in the construction industry: A bureaucratic permitting process is bad for everybody but the government.”
The country’s pressing housing needs cannot wait for a deadlocked Washington to act. Fortunately, the states — the proverbial laboratories of our democracy — are launching their own experiments.